1988 (12) TMI 209 - AT - Central Excise

Appellate Tribunal rules in favor of manufacturers in proforma credit dispute

The Appellate Tribunal allowed the appeal, ruling in favor of the appellants, who were manufacturers of S.O. Dyes. The Tribunal held that the demand for ... Proforma credit availed of on account of error, omission or misconstruction Issues:- Condonation of delay in filing application under Rule 56A- Demand for payment of proforma credit incorrectly availed ofCondonation of Delay:The appeal before the Appellate Tribunal concerns the condonation of a 6-day delay in filing an application under Rule 56A for permission to avail of proforma credit for imported goods. The appellants, manufacturers of S.O. Dyes, imported Dianisidine Base and realized later that the requisite permission under Rule 56A was not applied for promptly. The Collector rejected their application for condonation and demanded immediate payment of the amount of proforma credit wrongly availed of. The appellants argued that they complied with substantive provisions of Rule 56A, and the delay was unintentional. They contended that the Collector's demand without issuing a notice was a violation of natural justice and Rule 56A, which requires notice for recovery of erroneously taken credit.Demand for Payment of Proforma Credit:The department argued that the delay was not condoned as it did not fit the circumstances specified in Rule 56A. Consequently, the demand for repayment of the wrongly availed credit was justified. However, the Appellate Tribunal noted that the department should have issued a notice for recovery within six months under sub-rule 5 of Rule 56A, which was not done. The Tribunal held that the demand made by the Collector without issuing a notice was unlawful and violated procedural requirements. The Tribunal agreed with the appellants that non-compliance with a procedural requirement under sub-rule 2 did not warrant enforcement of recovery when the department itself failed to comply with the notice requirement under sub-rule 5. Therefore, the demand for payment of the proforma credit was deemed unsustainable, and the appeal was allowed on this ground.